Coalition pledges pension reform

The government announced more pensions reform in the Queen's Speech.

The Coalition has announced its last legislative programme of this parliament. The measures announced in the Queen's Speech included a charge on plastic bags in supermarkets, and some tweaks to childcare legislation and the planning system.

The speech also contained two pension reforms. As announced in the Budget, savers will have greater freedom on how they can manage their pension pots, while the government is also legislating for the introduction ofDutch-style Collective Defined Contribution (CDC) funds, where employees across a company pool their savings and invest them together, rather than saving in an individual pot.

What the commentators said

Those who have saved into a pensionall their working lives "will no longerbe ripped off sorry, be forced to buyan annuity in a market fixed by insurance companies". This allows individuals to choose what to do with their retirement fund.

The future of CDC schemes, on the other hand, is unclear. On the plus side, said Alistair Osborne in The Times, if members pool their savings, they should reduce their exposure to market volatility and cut management costs. There is no need for an annuity as the pension is paid out of the same overall pot.

However, not only can returns disappoint, leading to cuts in benefit levels as we have seen in Holland, but the young tend to cross-subsidise the old. They may be asked to make bigger contributions to maintain older members' benefits.

Ultimately, said Allister Heath, itseems hard to get excited about ascheme where you simply have "pension rights that depend on investment performance", rather than a pot of your own money.

However, the policy of auto-enrolment in occupational pensions of the past few years is proving very successful. On balance, "after years of political vandalism, UK pensions are on the mend".

Recommended

The best 0% balance-transfer credit cards
Credit cards

The best 0% balance-transfer credit cards

These 0% balance transfer credit cards offer some of the best deals on the market today.
26 May 2023
Best savings accounts – May 2023
Savings

Best savings accounts – May 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
26 May 2023
The best one-year fixed savings accounts - May 2023
Savings

The best one-year fixed savings accounts - May 2023

You can now earn 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the latest rates available now.
26 May 2023
Best easy access savings accounts – May 2023
Savings

Best easy access savings accounts – May 2023

Rising interest rates have boosted the returns on instant-access savings accounts and we're seeing some of the highest rates seen in years.
26 May 2023

Most Popular

Nationwide to give £100 cash boost to customers
Personal finance

Nationwide to give £100 cash boost to customers

Nationwide Building Society is giving customers £100 as it reinvests profits. Dubbed the Nationwide Fairer Share scheme, we look at who is eligible.
22 May 2023
Holiday rip-off: Millions of travellers hit with hidden costs by using debit card abroad
Personal finance

Holiday rip-off: Millions of travellers hit with hidden costs by using debit card abroad

A family of four on a week-long trip to France could pay an extra £212 in fees by using their everyday bank card compared to the lowest-cost option, a…
23 May 2023
Best savings accounts – May 2023
Savings

Best savings accounts – May 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
26 May 2023